The (Limited) Power of Blockchain Networks for Information Provision

Benedikt Franke (), Qi Gao Fritz () and Andre Stenzel
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Benedikt Franke: University of Würzburg, 97070 Würzburg, Germany
Qi Gao Fritz: University of Mannheim, 68131 Mannheim, Germany

Management Science, 2024, vol. 70, issue 2, 971-990

Abstract: We investigate the potential and limits of privacy-preserving corporate blockchain applications for information provision. We provide a theoretical model in which heterogeneous firms choose between adopting a blockchain application or relying on traditional third-party intermediaries to inform the capital market. The blockchain’s ability to generate information depends on each firm’s data profile and all firms’ endogenous adoption decisions. We show that blockchain technology can improve the information environment and outperform traditional institutions with firms’ adoption decisions serving as a credible value signal and the application uncovering firm values by analyzing all participating firms’ data. However, we also characterize an adverse mixed-adoption equilibrium in which neither of the two channels realizes its full potential and information provision declines not only for individual firms, but also in aggregate. The equilibrium is a warning sign that has broad implications for policymakers’ regulatory effort and investors’ assessment of corporate blockchain applications.

Keywords: blockchain; disclosure; information provision; peer-to-peer network (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:70:y:2024:i:2:p:971-990

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